Tax-Free to Taxable Equivalent Yield
A taxable product hands part of the interest to tax, so you keep less than the headline rate. Divide the tax-free rate by (1 − tax rate) to find the taxable rate that leaves you the same money.
Your numbers
Equivalent taxable rate
3.546%
Points
0.546%
Interest after tax
300,000
What it means
A tax-free 3% matches a taxable 3.546%. Anything below that and the tax-free option wins.
Formula
Equivalent taxable rate = Tax-free rate ÷ (1 − Tax rate ÷ 100)
Rates on investment income differ by country and, within a country, by product and holding period. Check the rate on each product you are comparing.
What to enter
| Input | Default | Accepted range |
|---|---|---|
| Tax-free rate (%)The headline rate on a product whose returns are not taxed. | 3 | 0 ~ 50 |
| Tax rate (%)The tax rate that applies; it varies by country and item. | 15.4 | 0 ~ 60 |
| PrincipalThe money you put in — the base that earns interest. | 10,000,000 | 0 and up |
Step by step
Quick reference table
Results when only Tax-free rate (%) changes and everything else stays put.
| Tax-free rate (%) | Equivalent taxable rate (%) | Points (%) | Interest after tax |
|---|---|---|---|
| 1.5 | 1.773 | 0.273 | 150,000 |
| 2.25 | 2.66 | 0.41 | 225,000 |
| 3 | 3.546 | 0.546 | 300,000 |
| 4.5 | 5.319 | 0.819 | 450,000 |
| 6 | 7.092 | 1.092 | 600,000 |
What each result means
| Result | At default values |
|---|---|
| Equivalent taxable rate (%)The taxable rate that, after tax, matches the tax-free one. | 3.546 |
| Points (%)The gap between two percentages, read in points rather than percent. | 0.546 |
| Interest after taxThe interest left once tax on it is taken off. | 300,000 |
Common mistakes
Rates on investment income differ by country and, within a country, by product and holding period. Check the rate on each product you are comparing.
Glossary
- Tax-free rate
- The headline rate on a product whose returns are not taxed.
- Tax rate
- The tax rate that applies; it varies by country and item.
- Principal
- The money you put in — the base that earns interest.
- Equivalent taxable rate
- The taxable rate that, after tax, matches the tax-free one.
- Points
- The gap between two percentages, read in points rather than percent.
- Interest after tax
- The interest left once tax on it is taken off.
Frequently asked questions
Q. How is Tax-Free to Taxable Equivalent Yield calculated?
Equivalent taxable rate = Tax-free rate ÷ (1 − Tax rate ÷ 100) — A taxable product hands part of the interest to tax, so you keep less than the headline rate. Divide the tax-free rate by (1 − tax rate) to find the taxable rate that leaves you the same money.
Q. Can you walk through an example?
With Tax-free rate 3%, Tax rate 15.4%, Principal 10,000,000, the answer is Equivalent taxable rate 3.546%.
Q. What do I need to enter?
Enter Tax-free rate, Tax rate, Principal. The result recalculates as you type, and an empty box counts as zero.
Q. How much does the answer move if I change a number?
Changing only Tax-free rate (%) moves the answer to Tax-free rate (%) 1.5 → Equivalent taxable rate (%) 1.773 and Tax-free rate (%) 6 → Equivalent taxable rate (%) 7.092. The table below lays out five steps.
Q. How are the numbers rounded?
Money is shown to the nearest whole unit, percentages to one decimal place and everything else to two. What you see is rounded; the calculation itself carries the unrounded value forward.
Q. Anything to watch out for?
Rates on investment income differ by country and, within a country, by product and holding period. Check the rate on each product you are comparing.
Related calculators
Tax rates and interest conventions differ by country and product — check your contract for real transactions.